QO Funds to Form 8996: "I Forgot That You Existed." Shake It Off with a Private Letter Ruling!

For the past several years, qualified opportunity funds (QO Funds) have been the go-to investment vehicle for investors seeking significant tax incentives (including the deferral, and in some cases, permanent exclusion of eligible taxable gains). The initial investment in a QO Fund, however, is not the End Game. Instead, it is essential to adhere to the complex rules governing QO Funds. One critical step that should not be forgotten is timely filing IRS Form 8996. Form 8996, which should be filed annually, is used to self-certify the entity as a QO Fund.

But what happens if you make an Innocent mistake and miss the filing deadline? Perhaps you or your advisor did not realize you needed to file Form 8996. Maybe an administrative oversight resulted in a failure to attach the form. The good news is, a QO Fund can Shake It Off and request regulatory relief by filing a Private Letter Ruling (PLR) asking the IRS to let it Begin Again by granting an extension of time to file Form 8996. 

Since 2020, roughly 80 QO Funds have requested – and been granted – relief. The consistency in which the IRS extends relief indicates it is taking a lenient approach towards QO Funds that fail to comply with their filing deadlines. From personal experience, favorable PLR relief is something a few QO Fund clients know All Too Well. 

For more information on requesting PLR relief, or QO Funds in general, please do not hesitate to contact ME!